Let’s start by looking at some trends before digging deeper into what type of business you might want to start and ultimately, where to find your financing.
Table of Contents:
Should You Start a New Business After the Pandemic?
Whether or not you should start a business depends on a variety of factors. But to help frame your thinking a bit, consider a few pieces of data.
Big Names Have Emerged from Recessions
Incredibly successful companies such as Uber and Slack came out of the last recession–and these are just two examples. Crisis can be the inspiration for new ways of doing things, so if you are sitting on an idea that could help make life easier for people, now might be the time to act.
This just goes to show that the economy doesn’t have to be booming for new ideas to prosper. As long as you have a product or service that people want, you price it appropriately, and you market the company well, you can achieve success.
Resource: Need a Bank? Bank Novo are designed specifically for small businesses with a low fee structure.
Data Shows More and More People Want to Be Entrepreneurs
According to a study by Babson College, 27 million Americans are either starting or running new businesses. The same study showed that over 50% of Americans found that there was opportunity for new businesses, while 36% planned on developing and delivering an innovative service or product as their core offering.
As more and more Americans are laid off or furloughed, I can’t help but think those statistics are climbing, as people consider their options on how to make money. And in today’s environment, you no longer need a brick and mortar store to set up shop and make money.
In fact, according to an interview of Joe Galvin, chief research officer for Vistage (an executive coaching company for small to mid size businesses), people who are focused on digital transformation with their businesses have the opportunity to be incredibly successful. He said because people are staying home, so much energy is being focused toward online businesses, and it’ll ultimately accelerate the death of the brick and mortar business.
Before you completely decide if it’s time to start a new business, read on for more information to help inform your decision.
Industries Doing Well During the Pandemic
Businesses are having to quickly adapt to the changing environment due to the coronavirus pandemic. No longer can companies survive as solely a brick and mortar business, waiting on customers to walk in their door and spend money.
The U.S. Chamber of Commerce put together a list of 15 different types of businesses that are thriving during the pandemic. Many of them come as no surprise, but there are a few I want to highlight.
Many of us have either been told by our government to stay home or are just too nervous to go out and buy things like food, so delivery services have seen a huge uptick in demand.
A great example is Instacart. The food delivery app recently had to hire 250,000 more workers just to meet the growing demand for grocery delivery during the pandemic.
I can attest to this and the level of frustration I felt during this surge in demand. Before the pandemic, I was able to order groceries through Instacart and have them delivered later that day, no problem.
But since demand for delivery blew up after the coronavirus came, I was either unable to get a delivery or had to sometimes wait a week or more. Now, considering the circumstances, I didn’t mind, but it was frustrating to have to project grocery needs that far in advance.
The silver lining, of course, is a tremendous amount of opportunity for delivery. So whether you work for a company like Instacart or you start your own delivery-based service, chances are there will be a high demand even after things calm down.
As fear continues to spread from the coronavirus, both corporate and residential cleaning companies have seen a boom in demand.
While it may seem like this will peak during the pandemic, I surmise that these types of businesses will be in incredibly high demand after we go back to work and resume somewhat normal daily activities.
This pandemic has caused us to shift the way we think about everything. For example, have you ever washed your hands as much as you do now? I know I haven’t. In fact, my hands were raw a few weeks ago since I was washing them so much with antibacterial soap.
So we want to be clean and we want our environments to be clean, too. Thus, a business opportunity is born for people to clean homes and businesses. Plus, the more sterile you are (i.e., wearing a mask, gloves, and making sure things are totally sanitized), the more business you’ll have.
Sean Ludwig, contributor for the U.S. Chamber of Commerce, cites two small cleaning businesses in the article that have seen so much demand they have had to hire more people than ever before to keep up. I can’t see this type of demand going away any time soon.
And beyond the traditional cleaning services, enterprises have sprung up to fill the demand for personal protection. Clothing manufacturers across the country first helped to make face masks for medical professionals, but now that the CDC recommends everyone wear masks in public, existing companies have switched production to fill this emerging need.
Fitness Equipment Companies
Companies like Tonal, Mirror, and Peloton are booming right now since people are stuck inside but still want to work out. Mirror, for example, has a “mirror” product that you can stick on your wall and do live workouts while seeing your progress (since it is a mirror, of course).
And we all know about Peloton at this point–their bikes and treadmills continue to sell as people look for a way to get a quick workout in at home, while still enjoying the benefits of a live class (you know, that whole human interaction thing?).
So while these larger companies are seeing success, it doesn’t mean small businesses can’t, too. Whether you’re selling workout equipment or creating a service that allows people to have live, human-interaction (like a personal trainer) from the comfort of their own home, there’s a lot of opportunity to take advantage of here.
Should You Open One of these Businesses? Or Join One?
Whether or not you should open or join one of these businesses depends on many factors. You need to address your personal financial situation first. Do you have the capital to start a new business (more on this below)? What happens if it doesn’t work out, do you have a fall back plan?
I think now is an amazing time to start a business. There are so many opportunities, and more and more of them are popping up with the pandemic and our new way of living.
So if you think you’re ready, you need to go for it.
According to Bernhard Schroeder of Forbes, three of the biggest excuses we typically make for not starting a business are a fear of failure, the fact that starting a business is hard work, and a lack of security that comes from a steady paycheck.
He outlines a handful more excuses, but he makes the point that these excuses no longer matter. For example, he makes an excellent point about “security” with our regular day job. Schroeder states that “the real issue is that unless you work for the government, there is no guarantee of jobs for life.”
And he’s right. Pandemic or not, there’s no real guarantee for your employment. So think about that for a while before you make an excuse.
Where to Find the Capital to Start Your Business
You have several options for finding the capital to start a new business. While all of them can work, some are more desirable than others. But that doesn’t mean that a less desirable source of funding (i.e., credit cards) can’t work for you if you’re smart.
Here are the main options you have:
You can get a small business loan directly from a small business loan lender. It’s always wise to check with your current bank or local credit union first, but in case they don’t offer what you’re looking for, I have a couple of (possibly better) solutions for you (though some require that you’ve already been in business for a while).
The first is Kabbage. You may have heard about Kabbage on the radio or through some other form of advertisement. Their bread and butter is small business lending. You can get up to $150,000 by meeting only a few simple requirements. The downside is that APRs can be high and terms can be short.
The second option is a company called OnDeck. They too specialize in small business loans and offer two different options: term loans and lines of credit.
You can get up to half a million dollars in a small business loan if you’ve:
a) been in business at least a year,
b) have at least $100,000 in gross revenues each year, and
c) meet their other lending requirements (i.e., credit score, etc.).
I think a better option is to go with a peer-to-peer lender (P2P). A P2P lender is one that provides funding through other people. So, you’re essentially borrowing money from others and using a lending company as a middleman.
My favorite is Prosper. They’re the O.G. of P2P lending as they were basically the first one to hit the market around 15 years ago. While they don’t offer “small business loans” per se, you can get an unsecured loan through the platform for up to $40,000 at some pretty favorable rates.
Another option I like is LendingClub. Here, you can get a small business loan, but need to meet certain requirements–among them, be in business for at least a year and have at least $50,000 in revenues. Starting rates are pretty good, but if you have poor credit, rates can be astronomical. Which leads me to my next option…
Hear me out before you say that you’re not willing to fund a new business on a credit card. First of all, standard rates on credit cards can sometimes be better than a rate you’d get with a small business loan–you just have to shop around.
But I’m not talking about standard rates, that’s only a backup. I’m talking about cards that offer excellent promotional offers for opening the card–giving you a low APR (or even 0% APR) on purchases and balance transfers.
A great example is the ABOC Platinum Rewards Credit Card. This card gives you 0% APR on purchases for 12 months. That means you can get your business started and pay no interest on your balance for a year.
In addition, you’ll get $150 in statement credit after spending $1,200 in 90 days after opening the card. Plus, the card had great rewards. You’ll earn a point on every dollar purchased and 5x points–up to $1,500 every quarter–on dining, groceries, travel and gas.
So you can see, using a credit card wisely can actually help you get your business started at a low cost. Check out our complete list of the best balance transfer credit cards and the best interest-free credit cards for more information.
Use Your Savings
A riskier option is to use your emergency savings. I don’t recommend it, but if you are out of other options, you might consider tapping into your savings to fund your new business. Just be smart about it and make sure you have a game plan for both earning money and a fail-safe if things don’t work out.
Borrow from Family
You can ask to borrow money from family, as painful as that might be. In many cases, your family members might help out if you have a good business plan–and they’ll be even more likely if you’re willing to either pay them back with interest or cut them in on the business profits if and when it becomes successful.
How Are Things Different for Small Businesses Now and Moving Forward?
In the short-term, most of us are working from home, kids are going to school online, and we’re practicing social distancing. But what happens in the long-run? How will things change?
The short answer is we just don’t know.
According to Joe Galvin in the interview I cited above, this is what’s called a black swan event–meaning that it’s totally unpredictable and it has a lasting, long-term effect. (The term black swan was popularized by a writer and former trader Nassim Nicholas Taleb, who wrote a book with the same title.) Galvin says that the coronavirus will have a profound and long-term effect on us, and, until we reach the bottom, we won’t know how severe the impact is.
We can guess on how small businesses will fare in the future, but that’s only a guess. I fully expect people to be more tentative about social interaction–at least for the next year or so.
This means that fewer people will want to shop in brick and mortar stores, go to gatherings and sporting events, or possibly hit the bar for an after work happy hour as often.
And within that lies business opportunity. Think remote services that people can access from their homes and still get the human-need of social interaction.
What Resources Are Available for Me?
As a small business owner (or an aspiring one) there are plenty of resources available to you. To start, here are four of our resources that will help you ideate on businesses to start:
- Multiple Income Streams: 10 Ways to Earn Secondary Income
- 35 Best Apps That Can Make You Money Fast in 2020
- 7 Passive Income Ideas for 2020
- 75 Side Hustle Ideas
Another resource I found particularly helpful was one that Columbia University put together, which covers possible grants and other support you can find as a small business owner. To name a few:
- Hello Alice is offering $10,000 grants to help small business owners
- Microsoft is giving away six months of Office 365 for free
- Facebook is offering $100 million in small business grants
Finally, a super-robust resource comes from the U.S. Small Business Administration Office of Advocacy. They put together a very deep guide on COVID-19 Resources for Small Businesses. There, you’ll find all types of information to help you with your small business during the pandemic.
Other Banking Services
Once you get your business up and running, you’ll want to keep your business and personal finances separate. There are loads of banks that offer small business programs, but one that can be done online is Bank Novo. They are designed specifically for small businesses with a low fee structure. They only offer one type of account–a free business checking account–and it comes with discounts on things small businesses often need, like Stripe for processing credit cards and Salesforce for tracking leads.
In short, do your research, but don’t be afraid to take the jump if it’s what you want to do. Crisis can be devastating, but they also offer up a chance to innovate. If you’ve been mulling on a business idea, now might be as good of a time as any to make it happen.